2019 (3) TMI 847 - AT - Central Excise

Classification of goods - Mehandi Cone/Paste and Mehandi Powder - N/N. 12/2012-CE dated 17.03.12 - Board vide letter dated 10.07.2014 - Held that - The said entry under notification is very clear with reference to henna paste. The only condition is that the said paste should not have been mixed with any other ingredients. The scope of the said entry was clarified by the Board vide letter dated 10.07.2014. The objection of the Revenue, that no other ingredients should have been added to claim the exemption, is correct. However, the facts of the present case did not reveal that any other ingredients at all has been added in making the henna paste. Admittedly, the clove oil is a liquid used to make henna paste from powder and make it marketable as such paste in cones - There is no evidence on record which could show presence of any active ingredients to heena powder to make the heena paste other than the said oil or liquid. Therefore, the present appeal of the appellant is required to be allowed in view of clarification issued by Board vide letter dated 10.07.2014. The facts of the present case did not reveal that any other ingredients at all has been added in making the henna paste. Admittedly, the clove oil is a liquid used to make henna paste from powder and make it marketable as such paste in cones. We note that the said process is for making the paste, marketable/useable much later by the customers. There is no evidence on record which could show presence of any active ingredients to heena powder to make the heena paste other than the said oil or liquid. Therefore, the present appeal of the appellant is required to be allowed in view of clarification issued by Board vide letter dated 10.07.2014. The adjudicating authority as well as the first appellate authority was not correct in placing reliance on the CRCL Report dated 29.05.2014 which was neither forming part of the SCN nor pertained to the lot which were manufactured and cleared by the appellant during the period covered in the SCN i.e. June 2013 to March 2014 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to denial of exemption under Notification No. 12/2012-CE for central excise duty on Mehandi products.

Analysis:
The appellant challenged the denial of exemption under Notification No. 12/2012-CE for central excise duty on Mehandi products. The appellant was engaged in manufacturing Mehandi Cone/Paste and Mehandi Powder, claiming exemption under the said notification. However, a show cause notice was issued proposing to deny the exemption, asserting that the appellant was mixing oils with henna powder for making paste, which was not covered under the exemption. The Order-in-Original dated 25.10.2016 upheld the denial of exemption, imposing central excise duty, interest, and penalty. The Order-in-Appeal dated 04.04.2018 rejected the appellant's appeal, leading to the present appeal before the Tribunal.

The Tribunal examined the issue by considering the clarification provided by the Board regarding the scope of the exemption under the said notification. The clarification stated that the exemption includes henna powder mixed with a liquid to change its form into paste, excluding cosmetics. The Revenue argued that henna paste with other ingredients does not qualify for the exemption. However, the appellant contended that clove oil was added to henna paste for longevity and preservation, not as an active ingredient. The Tribunal noted that no evidence showed the addition of other active ingredients besides the oil to make the paste marketable for later use, as clarified by the Board.

Moreover, the Tribunal addressed the procedural aspect of the case. It highlighted that the show cause notice did not allege the addition of any chemical to henna powder, and no samples were drawn during the relevant period. The reliance on a CRCL report from a different period was deemed inappropriate, as per established legal principles. Citing precedents, the Tribunal emphasized that the show cause notice forms the foundation for duty levy, and any reliance on reports not part of the notice is unjustified. Consequently, the Tribunal set aside the Order-in-Appeal, allowing the appellant's appeal with consequential relief.

In conclusion, the Tribunal's decision favored the appellant by allowing the appeal and providing relief regarding the denial of exemption under Notification No. 12/2012-CE for central excise duty on Mehandi products. The judgment emphasized adherence to legal principles in adjudication and highlighted the importance of procedural fairness in tax matters.